Pump's daily trading recs, emphasis on short selling Message Board

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Strategies & Market Trends : Pump's daily trading recs, emphasis on short selling

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To: Epicenter who wrote (101)	5/1/2001 1:50:07 PM
From: allen menglin chen	Read Replies (1) of 6873

NVDA -- Day Trader : Who said that momentum investing was dead? Those short shares of 3D graphics chip maker, NVIDIA Corp (NVDA 88.43 +5.13), are finding out the hard way that the mo-mo players have returned to the market, and are just as aggressive as ever. As most technology sector stocks struggle to climb off one and two year lows, NVIDIA shares are currently trading within just 2% of a new all-time high... Behind the stock's spectacular rise has been a combination of strong earnings growth and unsuccessful betting by shorts that NVDA's earnings estimates will be proven overly optimistic -- in the same way that almost every other supposedly insulated technology name has proven vulnerable. Unlike its mostly 4-letter (i.e., Nasdaq-traded) traded cohorts, NVIDIA has continued to post robust revenue growth and deliver upside earnings surprises. What other technology company can say that its earnings estimates have actually been going up? A closer look at the numbers reveals that even with the stock on the verge of making a new high, NVDA's valuation is far from excessive... Consensus earnings estimates for 2001 and 2002 of $1.75 and $2.30 (+31.4%), respectively, produce P/Es of 50.5 and 38.5. Even in the current market environment, a 30x forward multiple is easily palatable, especially when their is a growth rate to match... NVDA shorts are convinced that forecasts will have to come down with the rest of estimates in the semiconductor sector... With the company not cooperating by lowering guidance and the stock showing that is not ready to begin pricing in short-seller criticisms such as margin erosion and slowing demand, shorts have continued to be squeezed by the stock... The key to a momentum stock maintaining its following is the ability to continue delivering excellent earnings growth. Until investors/traders are spooked out of the shares by an earnings warning or a major downward revision by an analysts, NVDA will trade almost exclusively on momentum and technicals. From a technical standpoint, NVDA shares will need to clear resistance at $89.99. A failure to move through this level over the very short-term would entice shorts into pouring more stock onto the more than 10 mln shares that have already been sold short. -- Damon Southward, Briefing.com

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